China Says It Will Keep Yuan Rate Stable in '05
WSJ.com - China Says It Will Keep Yuan Rate Stable in '05China Says It Will Keep
Yuan Rate Stable in '05Associated Press
February 25, 2005 9:13 a.m.BEIJING – China Friday said it would keep a strict hold on its currency controls this year, saying it needs to improve its financial system before finding a new foreign-exchange regime.
"China's central bank has vowed to keep the yuan exchange rate basically stable for 2005," the official Xinhua News Agency said.
At the same time, the central bank will push forward exchange-rate reform in an "active and prudent manner," the report said, but it did not provide details.
The U.S. and other trading partners have complained that Beijing's policy of fixing its currency at a rate of 8.28 yuan to the U.S. dollar gives Chinese exporters an unfair price advantage.
Chinese leaders have said they plan to gradually let the yuan trade more freely, but have given no timetable, contending that China's fragile financial system requires a stable currency.
Europe's top trade negotiator urged China to broaden the yuan's link to the U.S. dollar to include other major currencies. European Union Trade Commissioner Peter Mandelson, in a speech in Beijing, said such a move would make it easier for the EU to justify lifting a 15-year-old arms embargo on China.
Mr. Mandelson said he discussed the arms-embargo issue during two days of meetings with Chinese Vice Premier Wu Yi and Commerce Minister Bo Xilai. Mr. Mandelson said it is time to lift the ban given the rapidly developing relations between the EU and China.
"To treat China as some sort of pariah in maintaining this arms ban is, in the view of Europe's member states, no longer valid," Mr. Mandelson said at a press conference.
France and Germany are leading the push to end the embargo that was imposed after China's 1989 military crackdown on pro-democracy demonstrations in which hundreds, if not thousands, died.
While the ban "sprang directly from European reaction to the events," Mr. Mandelson said, "a lot of water has passed under the bridge since then. A lot of people have moved on and in the view of many, the arms ban has simply become an anachronism."
An EU code of conduct that regulates all weapons sales to other countries forces member nations to ensure the weapons they sell are not used for internal repression, external aggression or where serious human rights violations have occurred -- a position Mr. Mandelson endorsed.
"The key question is not whether [the ban] stays or goes but what replaces it," he said. "A clear and strong code of conduct for arms sales will do the job better and better reflect the modern, material relationship between China and the European Union." China claims the EU as its largest trading partner, with two-way trade exceeding US$150 billion (€115 billion) in 2004.
The U.S. has voiced strong opposition to the lifting of the weapons embargo, saying European weapons sales to China could endanger Taiwan and U.S. forces in Asia. China and Taiwan split in 1949 during civil war but Beijing considers the self-ruled island its territory and has threatened war if Taipei takes steps toward formal independence. The U.S. cut formal ties with Taiwan in 1979 but is committed by U.S. law to supply it with the arms needed to defend itself. U.S. arms sales to China are banned.
Mr. Mandelson said talks with Chinese leaders also focused on deepening strategic relations between Europe and China. He said the EU and China will set up joint export groups to nail down the enforcement of intellectual property rights in China, a sensitive issue in a country where counterfeit goods are freely available.
Copyright (c) 2005 The Associated Press
